Case Number: ITA 983/DEL/2021
Appellant: Mehra Engineering Corporation, New Delhi
Respondent: Assessing Officer A.O, New Delhi
Assessment Year: 2019-2020
Result: 2019-2020
Case Filed on: 2021-08-17
Order Type: Final Tribunal Order
Date of Order: 2022-02-25
Pronounced on: 2022-02-25
This case involves an appeal filed by Mehra Engineering Corporation (hereinafter referred to as ‘the Appellant’) against the order dated 30.07.2021 passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC) [CIT(A)], New Delhi, in relation to the disallowance of contributions towards Employee Provident Fund (EPF) and Employee State Insurance (ESI) for the assessment year 2019-20. The appeal was heard and decided by the Income Tax Appellate Tribunal (ITAT), Delhi “SMC” Bench through video conferencing.
The Appellant, Mehra Engineering Corporation, filed its return of income for the financial year 2018-19 on 11.10.2019, declaring a total income of Rs. 9,67,790/-. The total tax liability was Rs. 3,11,412/-, discharged through TDS, TCS, and advance tax. A refund of Rs. 31,680/- was claimed. The Central Processing Unit (CPC) sought clarification regarding the allowability of expenditure related to EPF and ESI contributions made by the employee of the Appellant’s company. The Appellant provided online justification, stating that all dues were deposited before the due date prescribed under Section 139(1) of the Income Tax Act, 1961. However, CPC rejected the submissions and passed an intimation order under Section 143(1) on 29.02.2020, making an addition of Rs. 1,94,091/- to the income due to non-deposit of employees’ contributions within the timeline specified under the EPF and Miscellaneous Provisions Act, 1952, and the Employees State Insurance Act, 1948.
The Appellant raised the following grounds of appeal:
The Tribunal, led by Shri Kul Bharat, Judicial Member, noted that the issue revolved around the disallowance of expenditure due to the delay in the deposit of employees’ contributions to EPF and ESI. The Tribunal referenced the judgment of the Hon’ble Jurisdictional High Court of Delhi in the case of PCIT vs. Pro Interactive Service (India) Pvt. Ltd., which held that the legislative intent was to allow expenditure only when the payment is actually made, not to treat belated payments of EPF and ESI as deemed income under Section 2(23)(x) of the Act. The Tribunal found that the Appellant had deposited the contributions before the due date of filing the income tax return under Section 139(1) and that the issue was covered in favor of the Appellant by the Delhi High Court’s ruling in the case of Commissioner of Income Tax vs. AIMIL Limited (2010) 321 ITR 508 (Del).
The Tribunal directed the Assessing Officer to delete the disallowance and allowed the grounds raised by the Appellant. The appeal was decided in favor of the Appellant, and the disallowance of Rs. 1,94,091/- was deleted.
Order: The appeal of the Appellant is allowed.
Order pronounced in the open Court on 25th February, 2022.
-Sd/- (KUL BHARAT, JUDICIAL MEMBER)
Date:- 25.02.2022
Copy forwarded to:
Assistant Registrar
ITAT, New Delhi
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